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Krisko Industries generated FCFF of $430,000 last year. The firm is expected to grow at a rate of 15% for the next two years. After
Krisko Industries generated FCFF of $430,000 last year. The firm is expected to grow at a rate of 15% for the next two years. After this high growth period, the firm is expected to grow at a rate of 6% for the forseeable future. The following data applies to Krisko:
- Market value of debt = $3,000,000
- Book value of debt = $2,800,000
- Pre-tax cost of debt = 6%
- Bingo's beta = 1.4
- Risk-free rate - 3%
- Market risk premium = 8%
- Shares outstanding = 500,000
- Current share price = $10
- Book value of equity = $2,000,000
- Tax rate = 40%
Using an FCFF approach, which of the following is closest to the value of the firm's equity?
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